BBed Private Limited is a privately-owned budget hotel business in Singapore. The owner of BBed Private Limited is planning to sell the firm to a PE investor. Estimate the PE investor's cost of equity in this transaction, given the following valuation information below:

• The firm (BBed) is 100%-equity funded. In Singapore, the current risk-free rate is 3% and market risk premium is 6%.
• The average unlevered beta for budget hotel business (industry) is 1.10 and the correlation () in returns for the budget hotel business and the market is 25%.
• The PE investor invests primarily in the property sector and, thus, is not fully diversified. The return correlation for the PE investor's portfolio and the market is 50%.

	A.	16.2%
	B.	13.5%
	C.	10.6%
	D.	9.6%
	AND.	29.4%